January 12th, 2018 → 7:08 am @ MacDev Financial // No Comments
It’s tax season again. Are you struggling to save for retirement, despite putting money into a Registered Retirement Savings Plan (RRSPs) to take advantage of the tax break now?
You are not alone. According to a recent BMO survey, 4 out of 10 Canadians are actually withdrawing money from their RRSP plans early to cover life expenses.
And while the idea of a tax deferral RRSP savings plan might look good on paper, ask yourself this one question: What direction do you think tax rates are likely to go in the future? Most experts agree probably higher. You’ll only end up paying higher taxes on a bigger number.
We’re pretty sure you don’t like the idea of paying out so much in taxes. Here are 4 tax-free advantages of how a Bank On Yourself® (BOY) concept policy using participating whole life insurance as the savings vehicle will help you pay less.
A BOY planned policy provides certainty and helps you grow a guaranteed tax-free retirement income through a pre-set annual cash value increase and the potential to receive dividends in your participating whole life policy. Unlike a RRSP that is taxable income when you withdraw it, you don’t pay tax on BOY withdrawals when you retire.
While every Canadian is entitled to Old Age Pension (OAP) the Canadian Pension Plan (CPP) after age 60, both benefits are considered taxable income. Also, if your 2017 net income before adjustments is greater $74,789 ($73,756 for 2016) then you will have to repay 15% of the excess over this amount, to a maximum of the total amount of OAS received. This claw back is called the OAS recovery tax. However, any retirement income you actually take out from your BOY planned policy is NOT included in the income totals CRA uses to determine whether, and how much, your OAP and CPP cheques should be taxed.
Business owners and professionals are using BOY plans to become their own source of financing for business vehicles, equipment, office buildings and more. When you finance business expenses this way, you can get tax deductions for interest and depreciation. Plus, it lets you recapture the interest you’d otherwise pay to banks and other financial institutions.
One of the most valuable benefits of a BOY planned policy is the death benefit. Just like the cash value, the death benefit of a properly structured policy grows by an exponentially increasing amount. The death benefit, which is likely to be many times larger than the amount you saved up, passes to your loved ones or favorite charities income tax-free under current tax law. You don’t get that with traditional, government-sponsored retirement plans.
With a Bank On Yourself® plan, it is possible to know the guaranteed minimum value of your retirement savings when you’re ready to tap into it. The BOY method also lets you take a retirement income with NO taxes due. If that sounds good to you, and you want to learn more, email [email protected] for a consultation or visit www.findoutmorenow.ca
Disclaimer: This information is given for informational or educational purposes only. All financial endeavors should be vetted through a financial professional; example, life insurance broker, financial but not limited to its agents, staff, associates and/or partners will not assume any liability for any information printed in this article; indirectly, or assumed.
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Tags: CPA, Financial Advice, retirement advice, retirement information, Tax Advice, Tax Information, Tax Tips
